Building continuous improvement into your business
No matter how well you do what you do, someday somebody is going to come along and try to do it better. That’s the nature of competition. To be able to compete, you need to continuously focus on reducing the waste and inefficiency constraining your business.
The journey to make your company leaner and more productive demands a continuous improvement mindset—a way of constantly challenging that way you do things and actively seeking opportunities to do things better, smarter and more efficiently.
While you may not be able to control external factors such as the exchange rate or what your competitors do, you can always continue to improve your operations.
What is continuous improvement?
Continuous improvement is a systemic review of your product and process performance with a focus on ongoing, incremental improvement.
From an operations perspective, continuous improvement is typically focused on the reduction of waste. To do this, you need to analyze each step of your operations and determine whether it adds value—defined as anything customers are willing to pay for—or whether it is waste.
At its core, continuous improvement is about identifying and eliminating waste, and ensuring that every aspect of your operations adds value.
Some examples of continuous improvement activities include:
- a weekly review of operational performance with an action plan to focus on the highest impact issues
- kaizen workshops on a manufacturing cell to reduce waste
- design changes to your product to increase its performance against key attributes (e.g., performance, cost, reliability)
Why should a business be involved in continuous improvement?
“At some point, any successful business will have competition—that’s the nature of the marketplace,” says Ed Ferguson, Senior Business Advisor, BDC Advisory Services. “To compete effectively, a business must identify inefficiencies, and work to reduce or eliminate them. That’s what continuous improvement is all about.”
For more than two decades, Ferguson has helped businesses realize the benefits of continuous improvement. In his experience, many new companies start with a great idea, product or service, and their initial focus is often on growth and innovation in production, distribution and sales. Once competitors enter the market, however, survival depends on how well a company responds and adapts to its customers and the marketplace.
“There’s a big difference between developing a successful product or service and running an efficient operation,” he says. “You can get started with the former, however, ultimately, you will need to do both to be successful.”
What are the benefits of continuous improvement?
Some of the most important benefits of an effective continuous improvement system include:
- improved product performance
- reduced costs and increased competitiveness
- enhanced quality, delivery, and customer satisfaction
- greater engagement of employees
The key is to successfully identify the product and process metrics that will allow you to compete and to build a culture focused on the continuous improvement of those metrics.
How do I implement continuous improvement in my business?
The foundation of continuous improvement is Deming’s plan-do-check-act (PDCA) cycle.
This method consists of four steps coming one after the other with the aim of creating a virtuous cycle of continuous improvement.
The plan-do-check-act cycle (PDCA)
Define key performance metrics
The first step in a continuous improvement journey is to define how you will compete in the market. This strategy is key as it will define the metrics you need to optimize to be successful. If your strategy is to compete on cost or value, then you will need metrics that demonstrate your performance against those attributes.
Some examples of key performance metrics for a company competing on cost or value include:
- labour efficiency
- defect rate
- on time delivery
- product reliability
Having the right metrics ensures that your continuous improvement efforts are directly focused on creating value for the customer, making you more competitive.
The next step in the cycle is to set a target for each KPI. When setting targets, entrepreneurs should consider the following:
- benchmarking competitor performance to identify targets
- reviewing your historical performance and looking at periods of high performance:
- historical average performance is not a continuous improvement target
- watch out for seasonal outperformance driven by external factors
- ensuring that targets are both ambitious and realistic:
- you won’t win by underperforming your competitors
- unachievable targets will demotivate the team and negatively impact results
Create a plan to achieve your targets
Once you know what you want to achieve, you need to determine how you will get there. This is a crucial step that is often missed in organizations.
Incremental increase in targets, year over year, without a plan to achieve them is not a recipe for success.
As part of the business planning process, ask the following question to each department.
- What initiatives are required to achieve the targets?
- Remember to include what resources the team will need to complete the initiative.
- It is common for companies to enlist the support of an internal or external specialist, such as a Lean Six Sigma Black Belt or external consultant, to facilitate kaizens or other initiatives that team members don’t have the experience or time to complete in addition to their day-to-day responsibilities.
Execute on your plan
Execution is key to success. The phrase “a poor strategy well executed is better than a good strategy poorly executed” is well known and, for good reason. All of the work to this point will not make a difference if you don’t execute with excellence.
Ensure that your team has the resources that it needs to execute on the initiatives. In the next phase we will check in early and often and make adjustments as needed.
Measure your success
The hard work defining the right metrics will enable your success here. Monthly meetings to review the status of the initiatives, and key performance metrics vs. targets, will provide valuable feedback to the team on what initiatives are working, and which ones are not.
Refine the approach
The final step in the plan is to take the required action to improve the results. Has the team struggled in implementing their initiatives? What skills or resources do they need to enable success? The key is to problem solve where necessary and take action to ensure that planned results are being achieved.
How do I build a culture of continuous improvement?
As the name suggests, continuous improvement is a never-ending quest—an ongoing journey rather than a destination. Once continuous improvement is integrated into a company’s culture, ideas about potential improvements come from all levels of the organization.
“It takes time to build that kind of culture,” says Ferguson. “A good way to start is to engage everyone. Publicize performance measures and targets. Encourage people to share ideas and reward the ones that contribute to results. Accountability in management is also important.”
“Continuous improvement is a laser-focus on creating value for end customers,” says Ferguson. “A company that is always adding value while eliminating waste is positioned for success.”